Earned Wage Access - What's the hype about and why you should give a fudge
Everyone who's tried it is hyping about earned wage access or EWA and that's because it's a groundbreaking new solution to financial wellness in the modern workplace. Basically, earned wage access is the idea that employees are entitled to immediate access to their earnings and that they don't have to wait until month end to get paid or resorting to credit to get them to the next pay day.
With this idea in mind we introduced Level Finance – an earned wage access platform that builds wealth and dignity for employees through savings, automated budgeting and access to pay before payday.
To help you understand EWA, we're addressing some frequently asked questions..
1. How does it work?
EWA is a groundbreaking new breed of financial products that serves employees’ short-term financial needs, while helping them save and build long-term wealth.
The concept is simple: employers register their businesses on Level Finance and this allows their employees to make use of Level’s EWA app – drawing from their own accrued wages when they need it, without creating a debt obligation. This is money employees have already worked for, so it’s not a loan, there’s no credit check and no interest charged.
Level's financial wellness solutions allow employees to enjoy frequent payouts without disrupting internal company processes or creating more work or extra costs to the organisation.
2. Who benefits from it?
The 30-day payroll cycle was adopted by companies to prevent costly frequent payroll transactions. While this is hugely beneficial to companies, it has disadvantaged workers who have had to accept the work now and get paid 30 days later pay policy, while they struggle to keep head above water financially. 76% of South African households live paycheque to paycheque and depend on exorbitant unsecured loans or credit card debt to make it to the next pay day.
The following demonstrates why the 30-day pay cycle is outdated:
It makes sense to get paid immediately after the job's done like with service providers such as plumbers, electricians, etc. Getting paid for work done means employees have the cashflow to do things they need to do without having to worry about how they are going to pay for it or having to take out a payday loan or use a credit card.
As a result of cashflow issues between payday, unsecured lending in South Africa has quadrupled to R225 billion between 2009 and 2019.
Read more about how financial burdens disenfranchise workers in our report on Fin Levies: The Poor Man's Noose
Level Finance partners with employers to create salary-linked employee benefits that help employees manage any shortfalls they incur during the month. Level reduces the need to dip into savings or access expensive credit between pay cycles.
Since Level was introduced at partner employers:
95% of Level members whose employers offer Level say it's improved their financial wellness
85% of Level members are less financially stressed since Level was introduced at their workplace
74% of Level members say they view their employer more favourably for offering Level
EWA does not only benefit employees, it makes good business sense to employers because it offers more than just a monthly paycheque. With Level you give your workforce a salary-linked employee benefit they want and need, because money anxiety follows your employees to the workplace. With their mind on debt, expenses, rising cost of living and lagging retirement readiness, their productivity suffers. We designed Level to break this cycle that’s painful for employees and employers alike.
The truth is:
Poor financial wellness costs employers 35% of annual payroll
80% of employees would switch to a company that cares more about their financial well-being
72% of employees say they worry about their finances while at work
59% of employees say that money is their no. 1 source of stress
53% employees are more likely to steal or commit fraud when financially stressed
(Source: PwC Employee Financial Wellness Survey)
Improve your brand
During the Covid-19 pandemic, several brands have suffered huge losses and reputational damage for poor treatment of their staff. On the other hand, brands that have supported and protected their staff during the pandemic have soared to greater heights and emerged as trustworthy, caring brands among customers and consumers.
By becoming a destination employer with Level your company will enjoy all of the benefits at no risk to you:
Zero cost to company
Seamless payroll integration
No impact on your cashflow
No financial risk to your company
Level can help you increase productivity and retention with no cost to you. Read more about this in our full report Raising HR To A New Level
3. How do I get involved?
Now, more than ever before, businesses in Africa are compelled to face hard truths about the devastating impact of their workforce’s financial needs on employee productivity and their business’ bottom line. The challenge lies in finding successful interventions to improve employee productivity and, by extension, net profits.
Earned wage access has evolved globally from a courteous employee benefit to an essential holistic financial wellness solution that notably improves employee engagement, productivity and overall retention.
The need for on-demand-pay is so high, that the 2019 Gartner Report: Empower Workers and Energize Your Employment Value Proposition With Flexible Earned Wage Access suggests that in the next three years 20% of businesses in the US, who pay the majority of staff hourly, will make use of flexible earned wage access solutions.
Another report by The Resolution Foundation highlights that "the huge growth in payday lending, indicates that when workers are paid can matter" and that "workers should have the right to choose how regularly they get paid". For more insight on this, read Level's article: Timing is Everything
To find out more about how earned wage access can benefit you, visit levelfinance.co.za or email us at firstname.lastname@example.org